Schneider's guidance

The acquisition is even starting to look more sane. The new critical power and cooling services unit into which APC was combined saw pro-forma sales rise 14 per cent on the year before. Operating margins are up into double digits and the integration effort is ahead of plan. The latest buy, Pelco, for EU1.1bn, looks tolerable, in spite of another eye-watering valuation. The security camera business is high growth and Schneider should realise savings from integrating it into its building automation unit.

Strong organic sales growth also provided some reassurance that weakness in US residential construction has not yet spread to the commercial side. North America, which contributes a third of Schneider's sales, grew by 13 per cent year on year, a slight acceleration from the first half. The expansion in Europe was only a little slower, helped by surging demand in eastern Europe and Russia. Meanwhile emerging markets, which contribute over a quarter of sales, were powered along by energy related spending.

For all that, a valuation of around 12 times forward earnings for the shares, compared with 15 for the broader capital goods sector, suggests that a degree of nervousness about the outlook persists. Indeed, Schneider can predict orders only a few months ahead and has yet to give guidance for 2008. Still, the company will benefit from rising expenditure on energy efficiency and infrastructure, and should win absolution from investors if profitability can be improved.